20 November 2020
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Recovery stocks gallery
Three fund managers highlight their key recovery stocks that they anticipate can outperform as investors come back to unloved names.
Haig Bathgate, head of portfolio management at 7IMBerkshire Hathaway is the American conglomerate holding company run by Warren Buffet, one of the world's most famous investors, and at the age of 90 he is showing no sign of his skill fading, or his work ethic slowing down.
His first-class investment skills over the years have given him a stellar reputation as an investor who can identify and nurture high-quality businesses. Berkshire and its underlying businesses have healthy balance sheets but have lagged compared to the wider market recently because of their cyclical, financial and consumer-facing exposure.
As the world returns to normal, we would expect the rise in manufacturing and consumer spending to boost the Berkshire portfolio, making this the ideal stock to gain exposure to many businesses that we believe will perform strongly when the recovery starts as has been evidenced in the recent rebound. As Berkshire Hathaway trades on the New York Stock Exchange, investors gain exposure to a range of fantastic business for the coming recovery without the added annual management fees of a fund, or the risk of investing in one company's shares.
Dan Harlow, manager of the AXA Framlington UK Smaller Companies fundThe old adage of not letting a crisis go to waste holds true for some of the best of the country's retailers.
In surely the most challenging year the consumer sector has ever faced, there might be some silver linings that will help well invested survivors enjoy a more prosperous future.
DFS Furniture is a case in point. The company's online platform, coupled with its own fulfilment capability, is helping the business drive market share gains.
This position is also being enhanced by the fact that weaker peers such as Harveys, Lombok and Oak Furniture Land have either ceased to trade or have closed much of their estate.
DFS, which along with its Sofology brand enjoys 30% market share, also has scope to leverage further efficiencies through improved rents, as well as its delivery network. This makes the company well placed for the future.
In the meantime, recent trading has been impressive as the country is in nesting mode, with a significant amount of people's time spent as home during the lockdown.
Christopher Rossbach, manager of the J. Stern & Co. World Stars Global Equity fundAlcon is the global leader in eyecare, offering a full suite of products from contact lenses to implantations and equipment.
It has been greatly impacted by the Covid-19 pandemic as the closure of hospitals meant postponement of elective surgeries, including for cataracts, and therefore impacted their related sales.
However, as most of us will need cataract surgery when we get older, surgeries are only postponed and not cancelled.
Alcon is recovering strongly given the critical nature of eyecare, indeed it has seen an earlier than expected - and faster - recovery across the board, with surgical procedures back to 85% of their pre-crisis level.
Going into the second wave of lockdowns, we believe Alcon represents a buying opportunity for long-term investors as it offers an attractive upside potential with exceptional fundamentals once our lives, economies and markets return to "normality".
This year has been a particularly challenging one for investors, with the global pandemic causing a sharp divergence in performance between certain sectors.
This year has been a particularly challenging one for investors, with the global pandemic causing a sharp divergence in performance between certain sectors. With news of effective vaccines now dominating...
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